Gold Jewelry Demand Up 6% in Q3 As Gold Prices Fall

Consumers in much of the world increased spending on gold jewelry, making pieces by designers such as Alex Soldier more in demand

Global demand for gold jewelry grew 6 percent year-over-year in the third quarter of 2015 to reach 631.9 tons, marking the strongest third quarter for jewelry demand since 2008, according to the World Gold Council. 

Lower prices for gold in July and August attracted consumer to buy gold jewelry, according to “Gold Demand Trends” report for the third quarter of 2015. This is in strong contrast with a 14 percent decline in gold jewelry demand in the second quarter.

On a year-to-date basis, jewelry demand amounted to 1,750.2 tons, 3 percent behind the same period of last year.

In India, the drop in price of gold led to a dramatic turnaround in consumer demand for the world’s second-largest consumer of gold jewelry. Year-over-year demand for the third quarter increased 15 percent to 211.1 tons. This compares with a 23 percent decline in the second quarter of 2015.

“Between mid-July and mid-August, retailers saw unusually brisk trade for the time of year,” according to the report. “Traditionally, this period experiences a lull in demand in the pause between the end of the April-May wedding season and the onset of autumn festivities, particularly by Diwali. The surge in demand ended after mid-August with a sharp recovery in the price of gold, exacerbated by a weakening of the rupee.”

Rural and semi-urban consumers were the main engine of growth in the Indian jewelry sector, according to the report.

However, the report warns that the “fourth quarter outlook is more muted.”

In China, the world’s largest gold jewelry market, lower prices and strong Valentine’s Day sales lifted consumer consumption in the third quarter as gold jewelry demand grew a modest 4 percent, year-over-year, to 187.6 tons. In line with global patterns, consumers responded favorably to the sharp drop in the price in July. The drop in price coincided with China’s Valentine’s Day on August 20.

Again, the WGC warns that there may be trouble ahead for the gold jewelry demand in the fourth quarter.

“The jewelry sector in China faces headwinds from a number of quarters. Credit conditions remain tight and competition fierce. 18k jewelry continues gradually to encroach on the market for 24k, in part due to manufacturers pushing more contemporary, highly designed product in order to gain market share.

“Expectations for the fourth quarter are somewhat more conservative, bearing in mind the weakening macro picture.”

Meanwhile, jewelry demand in Hong Kong grew by 22 percent to 13.7 tons, primarily due to higher-design, unique pieces, popular with mainland Chinese tourists.

In the US, jewelry demand continues to make “creeping gains,” the WGC says in its report. Demand grew by 2 percent to 26.2 tons.

“Growth in the sector reflected a continued desire for gold in the 10k and 14k sectors, against a hesitant economic recovery,” according to the report. “However, imports again outpaced demand, as the retail sector shored up inventories in anticipation of further strength in demand as the holiday season approaches.”

Other markets are as follows:

* East Asia - Jewelry demand made double-digit gains in Indonesia, South Korea and Vietnam, assisted by the falling price, WGC said. Indonesian demand was further boosted by an economic stimulus package unveiled by the government in early September. In Vietnam, economic growth and a relatively benign inflation environment also contributed to the upturn. Meanwhile, jewelry demand in Singapore and Malaysia declined by 24 percent and 10 percent, respectively. Year-on-year comparisons in Malaysia were negatively affected by the Goods and Services Tax, introduced in April.

* Turkey - Demand fell 29 percent year-over-year to 12.1 tons, the lowest third quarter ever, according to WGC records. “Political instability and the rising threat of terrorist attacks have had a devastating impact on consumer sentiment. Those wishing to seek respite from the turmoil in gold did so through investment products: bar and coin demand was contrastingly positive, up 97 percent year-on-year.”

* Middle East - Demand for gold jewelry varied as minor gains in Saudi Arabia and Egypt cancelled out slight declines in Kuwait, United Arab Emirates and the other Gulf countries, WGC said. “Lower oil prices and regional political tension tussled with the fall in gold prices to keep demand broadly stable.” The exception was Iran, where jewelry demand rallied by 40 percent to almost two-year highs. “Consumer sentiment was boosted by the signing of the nuclear deal, an affect which was further magnified by the tumbling gold price, although the 9 percent VAT rate introduced in Q2 was something of a headwind.”

Gold jewelry demand in Europe fell 1 percent as demand was stagnant across most markets, according to the report. Exceptions were France where gold jewelry demand declined 6 percent and Spain where demand grew 5 percent.

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U.S. Gold Jewelry Demand Down 8%; Global Jewelry Demand Up 6%; India Accounts for 32% of Demand

Gold jewelry demand in the U.S. fell 8 percent, year-over-year, to 21.7 metric tons for the second quarter of 2011, the World Gold Council said Thursday. However, in value terms, demand strengthened by 15 percent to $1.1 billion, which mostly reflects a 26 percent increase in the price of gold during the period.

“The combination of high unemployment, frail economic growth and stubborn inflation pressures produced an environment that was not favorable for gold jewelry demand,” the WGC said in its Gold Demand Trends report for the second quarter of 2011. “The quarter was characterized by continued thrifting among retailers among retailers in order to meet affordable price points and 10k items were encroaching 14k market share.”

The report went on to note that gold jewelry was facing “stiff competition” from silver, and specifically cited jewelry maker, Pandora, which specializes in silver charms. However, this company has lost some of its luster in recent weeks.

Overall global gold jewelry demand rose by 6 percent, year-over-year, to 442.5 tons, equivalent to $21.4 billion in value—led by India, which accounted for 32 percent of global jewelry demand, WGC said.

Gold jewelry demand in India rose 17 percent in the second quarter, compared with a relatively weak year-earlier period. In value, the rise was 42 percent for the period. The WGC noted that the Akshaya Tritya festival in May (traditionally a key gold jewelry buying occasion on the Hindu calendar) “stimulated a surge of buying.”

In China, jewelry demand in the second quarter, normally a quiet period, rose 16 percent, year-over-year, to 102.9 tons, WGC said. The local currency value of demand increased 40 percent, year-over-year, for the period. Demand for 24k and 18k gold in China represents gold's attraction as both an investment and as a reflection of the demand for better-quality jewelry.

“Increasing prosperity among Chinese consumers, supported by very strong growth in the domestic economy, is still a driving force behind gold jewelry demand,” the WGC said.

Among the European markets, Russia was the only country to experience limited growth for the second quarter, WGC said. Demand was “marginally higher” at 16.9 tons, which translated to growth in value of 27 percent. However, the WGC said that year-to-date imports have grown considerably in Russia as its economy improves.

The second quarter was weak for both Italy and the United Kingdom, with demand falling by 15 percent and 16 percent, respectively. In value, demand fell by 6 percent in Italy and 4 percent in the U.K. The report cites rising gold prices and continued economic weakness as the culprits.

Demand in Turkey was “unexpectedly” robust during the second quarter, up 7 percent to 17.4 tons, equivalent to 38 percent growth in value. Consumers purchased 22k gold jewelry during period of the quarter when gold prices dropped several times in May and June.

Among other Asian markets, gold jewelry demand fell 9 percent to 1.9 tons in Taiwan due to the rising price of the precious metal. However, gold demand for wedding sets grew 10 percent for the period.

In Japan, gold jewelry demand dropped 14 percent to 4.2 tons as consumers are still suffering from the March earthquake and tsunami, WGC said. In value terms, the decline was a more modest 4 percent. The WGC noted some “encouraging” signs in the Japanese market with increased demand for “very-high-end” jewelry and in gold chains, purchased more for investment purposes than adornment.

In the remaining markets in the Southeast region, gold jewelry fell due to its high price. Thailand, Indonesia and Korea reported year-over-year declines of 5 percent, 3 percent and 2 percent, respectively. In value terms, demand grew between 19 percent and 23 percent.

An exception for the region was Vietnam, where demand grew by 6 percent, year-over-year, to 3.3 tons, WGC said. This increase was concentrated in “chi” rings (plain 24k rings).

Middle East markets experienced weak second quarters. In Saudi Arabia, jewelry demand fell 16 percent to 21 tons, the largest drop in the region. Demand fell in Egypt by 8 percent to 8.3 tons. Demand from the other Gulf countries fell 4 percent to 4.9 tons. The most resilient market was the United Arab Emirates, I which demand fell by 1 percent to 16.1 tons.

Global gold demand for the second quarter of 2011 fell 17 percent year-over-year to 919.8 metric tons, according to the WGC Trends report. However, the value of the precious metal grew 5 percent to $44.5 billion—the second highest quarterly value on record due to the 26 percent increase in the price of gold during the period. Read more about the overall gold trends on my Forbes.com blog.